Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating To Listing and Trading of Shares of the iShares iBond Dec 2026 Term Muni Bond ETF Under Commentary .02 to NYSE Arca Rule 5.2-E(j)(3), 52266-52272 [2018-22428]
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52266
Federal Register / Vol. 83, No. 200 / Tuesday, October 16, 2018 / Notices
Electronic Comments
receives the benefit of a reduced fee
when intending to add liquidity.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on intramarket or
intermarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. In particular,
the Exchange believes the proposed rule
change will not burden intramarket
competition because the Post Only
Order instruction on complex orders
will be available to all market
participants. Additionally, use of the
Post Only Order instruction on complex
orders is voluntary. The Exchange also
believes the proposed rule change will
not impose any burden on intermarket
competition because this relates to an
instruction on orders that are submitted
to the Exchange and may only execute
on the Exchange. Additionally, nothing
prevents other options exchanges that
offer complex orders from adopting a
Post Only complex order type. The
Exchange also believes the proposed
rule change will promote competition,
as the Exchange believes it will
encourage the provision of additional
liquidity in the complex order market,
which benefits all market participants.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange consents,
the Commission will: (a) By order
approve or disapprove such proposed
rule change, or (b) institute proceedings
to determine whether the proposed rule
change should be disapproved.
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IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeEDGX–2018–043 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CboeEDGX–2018–043. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CboeEDGX–2018–043, and
should be submitted on or before
November 6, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–22426 Filed 10–15–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–84396; File No. SR–
NYSEARCA–2018–70]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating To Listing and
Trading of Shares of the iShares iBond
Dec 2026 Term Muni Bond ETF Under
Commentary .02 to NYSE Arca Rule
5.2–E(j)(3)
October 10, 2018.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
September 26, 2018, NYSE Arca, Inc.
(the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade shares of the iShares iBond Dec
2026 Term Muni Bond ETF (the
‘‘Fund’’) pursuant to NYSE Arca Rule
5.2–E(j)(3), Commentary .02. The
proposed rule change is available on the
Exchange’s website at www.nyse.com, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
6 17
PO 00000
CFR 200.30–3(a)(12).
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Federal Register / Vol. 83, No. 200 / Tuesday, October 16, 2018 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to list and
trade shares (‘‘Shares’’) of the Fund
under Commentary .02 to NYSE Arca
Rule 5.2–E(j)(3), which governs the
listing and trading of Investment
Company Units (‘‘Units’’) 4 based on
fixed income securities indexes.5 As
discussed below, the Exchange is
submitting this proposed rule change
because the ‘‘Index’’ (as defined below)
does not meet all of the ‘‘generic’’ listing
requirements of Commentary .02 to
NYSE Arca Rule 5.2–E(j)(3) applicable
to the listing of Units based on fixed
income securities indexes. The Index
meets all such requirements except for
those set forth in Commentary .02(a)(2).6
S&P AMT-Free Municipal Series Dec
2026 IndexTM
The Fund is a series of the iShares
Trust (the ‘‘Trust’’).7 Blackrock Fund
According to the Registration
Statement, the investment objective of
the Fund is to track the investment
results of an index composed of
investment-grade U.S. municipal bonds
maturing after December 31, 2025 and
before December 2, 2026. Specifically,
the Fund will seek to track the
investment results (before fees and
expenses) of the S&P AMT-Free
Municipal Series December 2026
IndexTM (the ‘‘2026 Index’’), which
measures the performance of
investment-grade, non-callable U.S.
municipal bonds maturing in 2026.9 As
of July 13, 2018, there were 3,331 issues
in the 2026 Index.
4 An open-end investment company that issues
Units, listed and traded on the Exchange under
NYSE Arca Rule 5.2–E(j)(3), seeks to provide
investment results that correspond generally to the
price and yield performance of a specific foreign or
domestic stock index, fixed income securities index
or combination thereof.
5 The Commission previously has approved
proposed rule changes relating to listing and trading
of funds based on municipal bond indexes. See,
e.g., Securities Exchange Act Release Nos. 67985
(October 4, 2012), 77 FR 61804 (October 11, 2012)
(SR–NYSEArca–2012–92) (order approving
proposed rule change to list and trade the iShares
2018 S&P AMT-Free Municipal Series and iShares
2019 S&P AMT-Free Municipal Series under NYSE
Arca Rule 5.2(j)(3), Commentary .02) (‘‘iShares
2018/2019 Order’’); 72523 (July 2, 2014), 79 FR
39016 (July 9, 2014) (SR–NYSEArca–2014–37)
(order approving proposed rule change to list and
trade iShares 2020 S&P AMT-Free Municipal Series
under NYSE Arca Rule 5.2(j)(3), Commentary .02)
(‘‘iShares 2020 Order’’); and 75468 (July 16, 2015),
80 FR 43500 (July 22, 2015) (SR–NYSEArca–2015–
25) (order approving proposed rule change to list
and trade the iShares iBonds Dec 2021 AMT-Free
Muni Bond ETF and iShares iBonds Dec 2022
AMT-Free Muni Bond ETF under NYSE Arca Rule
5.2(j)(3), Commentary .02) (‘‘iShares 2021/2022
Order’’ and, together with the iShares 2018/2019
Order and the iShares 2020 Order, the ‘‘iShares
Orders’’); 82295 (December 12, 2017), 82 FR 60056
(December 18, 2017) (SR–NYSEArca–2017–56)
(Notice of Filing of Amendment No. 3 and Order
Granting Accelerated Approval of a Proposed Rule
Change, as Modified by Amendment No. 3, to List
and Trade Shares of Twelve Series of Investment
Company Units Pursuant to NYSE Arca Rule 5.2–
E(j)(3)).
6 Commentary .02(a)(2) provides that Fixed
Income Security components that in aggregate
account for at least 75% of the Fixed Income
Securities portion of the weight of the index or
portfolio each shall have a minimum original
principal amount outstanding of $100 million or
more.
7 The Trust is registered under the Investment
Company Act of 1940 (15 U.S.C. 80a) (‘‘1940 Act’’).
On June 29, 2018, the Trust filed with the
Commission its registration statement on Form N–
1A under the Securities Act of 1933 (15 U.S.C. 77a),
and under the 1940 Act relating to the Fund (File
Nos. 333–92935 and 811–09729) (‘‘Registration
Statement’’). The description of the operation of the
Trust and the Fund herein is based, in part, on the
Registration Statement. In addition, the
Commission has issued an order granting certain
exemptive relief to the Trust under the 1940 Act.
See Investment Company Act Release No. 27661,
(January 17, 2007) (File No. 812–13208).
8 An investment adviser to an open-end fund is
required to be registered under the Investment
Advisers Act of 1940 (the ‘‘Advisers Act’’). As a
result, BFA and its related personnel are subject to
the provisions of Rule 204A–1 under the Advisers
Act relating to codes of ethics. This Rule requires
investment advisers to adopt a code of ethics that
reflects the fiduciary nature of the relationship to
clients as well as compliance with other applicable
securities laws. Accordingly, procedures designed
to prevent the communication and misuse of nonpublic information by an investment adviser must
be consistent with Rule 204A–1 under the Advisers
Act. In addition, Rule 206(4)–7 under the Advisers
Act makes it unlawful for an investment adviser to
provide investment advice to clients unless such
investment adviser has (i) adopted and
implemented written policies and procedures
reasonably designed to prevent violation, by the
investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted
thereunder; (ii) implemented, at a minimum, an
annual review regarding the adequacy of the
policies and procedures established pursuant to
subparagraph (i) above and the effectiveness of their
implementation; and (iii) designated an individual
(who is a supervised person) responsible for
administering the policies and procedures adopted
under subparagraph (i) above.
9 The 2026 Index is a product of S&P Dow Jones
Indices LLC (the ‘‘Index Provider’’), which is
independent of the Fund and BFA. The Index
Provider determines the composition and relative
weightings of the securities in the 2026 Index and
publishes information regarding the market value of
the 2026 Index. The Index Provider is not a brokerdealer or affiliated with a broker-dealer and has
implemented procedures designed to prevent the
use and dissemination of material, non-public
information regarding the 2026 Index.
Description of the Shares and the Fund
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Advisors (‘‘BFA’’) will be the
investment advisor for the Fund.8 State
Street Bank and Trust Company will
serve as the custodian, administrator,
and transfer agent for the Fund.
Blackrock Investments, LLC will act as
the distributor for the Fund’s Shares.
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52267
The 2026 Index includes municipal
bonds primarily from issuers that are
state or local governments or agencies
such that the interest on the bonds is
exempt from U.S. federal income taxes.
Each bond must have, inter alia, a
minimum maturity par amount of $2
million to be eligible for inclusion in the
2026 Index. To remain in the 2026
Index, bonds must maintain a minimum
par amount greater than or equal to $2
million, and must not be subject to the
federal alternative minimum tax
(‘‘AMT’’) as of each rebalancing date.
All bonds in the 2026 Index will mature
after December 31, 2025 and before
December 2, 2026. Bonds in the 2026
Index that mature or are pre-refunded in
their respective year of maturity do not
accrue interest past the maturity or prerefund date. All payments related to the
maturity or pre-refunding of a bond are
reinvested in tax-exempt cash or cash
equivalents for the duration of each
month.
The Fund will generally invest, under
normal market conditions,10 at least
90% of its assets in component
securities of the 2026 Index, except
during the last months of the Fund’s
operations, as described below. From
time to time when conditions warrant,
however, the Fund may invest, under
normal market conditions, at least 80%
of its assets in the component securities
of the 2026 Index.
The Fund may invest the remainder of
its assets in interest rate futures, interest
rate options, interest rate swaps,11 cash
and cash equivalents (including shares
of money market funds affiliated with
BFA), as well as in municipal securities
not included in the 2026 Index, but
which BFA believes will help the Fund
track the 2026 Index. The Fund will
generally hold municipal securities
issued by state and local municipalities
whose interest payments are exempt
from U.S. federal income tax, the federal
AMT and the federal Medicare
contribution tax. In the last months of
operation, as the bonds held by the
Fund mature, the proceeds will not be
reinvested in bonds but instead will be
held in cash and cash equivalents,
including, without limitation, shares of
10 The term ‘‘under normal market conditions’’ as
used herein includes, but is not limited to, the
absence of adverse market, economic, political or
other conditions, including extreme volatility or
trading halts in the fixed income markets or the
financial markets generally; operational issues
(such as systems failure) causing dissemination of
inaccurate market information; or force majeure
type events, natural or man-made disaster, act of
God, armed conflict, act of terrorism, riot or labor
disruption or any similar intervening circumstance.
11 The interest rate futures, interest rate options,
and interest rate swaps will be centrally cleared and
they will be collateralized.
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Federal Register / Vol. 83, No. 200 / Tuesday, October 16, 2018 / Notices
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money market funds affiliated with
BFA, AMT-free tax-exempt municipal
notes, variable rate demand notes and
obligations, tender option bonds and
municipal commercial paper. These
cash equivalents may not be included in
the 2026 Index. Around December 2,
2026, the Fund will wind up and
terminate, and its net assets will be
distributed to then current shareholders.
For informational purposes, as of
April 30, 2018, 76.30% of the weight of
the 2026 Index components was
comprised of individual maturities that
were part of an entire municipal bond
offering with a minimum original
principal amount outstanding of $100
million or more for all maturities of the
offering. In addition, the total dollar
amount outstanding of issues in the
2026 Index was approximately $30.8
billion, the total market value of issues
in the 2026 Index was $35.2 billion, and
the average dollar amount outstanding
of issues in the 2026 Index was
approximately $10,579,000. Further, the
most heavily weighted component
represented 1.36% of the weight of the
2026 Index and the five most heavily
weighted components represented
4.24% of the weight of the 2026 Index.12
Therefore, the Exchange believes that,
notwithstanding that the 2026 Index
does not satisfy the criterion in NYSE
Arca Rule 5.2–E(j)(3), Commentary
.02(a)(2), the 2026 Index is sufficiently
broad-based to deter potential
manipulation, given that it is comprised
of approximately 3,331 issues.
The Exchange is submitting this
proposed rule change because the 2026
Index for the Fund does not meet all of
the ‘‘generic’’ listing requirements of
Commentary .02(a) to NYSE Arca Rule
5.2–E(j)(3) applicable to the listing of
Units based on fixed income securities
indexes. The 2026 Index meets all such
requirements except for those set forth
in Commentary .02(a)(2).13 Specifically,
as of April 30, 2018, 9.43% of the
weight of the 2026 Index components
have a minimum original principal
amount outstanding of $100 million or
more.
12 Commentary .02(a)(4) to NYSE Arca Rule 5.2–
E(j)(3) provides that no component fixed-income
security (excluding Treasury Securities and GSE
Securities, as defined therein) shall represent more
than 30% of the weight of the index or portfolio,
and the five most heavily weighted component
fixed-income securities in the index or portfolio
shall not in the aggregate account for more than
65% of the weight of the index or portfolio.
13 Commentary .02(a)(2) to NYSE Arca Rule 5.2–
E(j)(3) provides that components that in the
aggregate account for at least 75% of the weight of
the index or portfolio each shall have a minimum
original principal amount outstanding of $100
million or more.
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Requirement for Index Constituents
On a continuous basis, (1) the Index
will contain at least 500 components;
and (2) each of the components of the
Index will have an outstanding par
value of at least $2 million.
The Exchange notes that, in the
iShares Orders, the Commission
approved Exchange listing and trading
of Units for which each bond in the
applicable underlying index must have
a minimum maturity par amount of $2
million to be eligible for inclusion in
such index, and each such index
included at least 500 components.14
In addition, the Exchange represents
that: (1) Except for Commentary
.02(a)(2) to Rule 5.2–E(j)(3), the 2026
Index currently satisfies all of the
generic listing standards under NYSE
Arca Rule 5.2–E(j)(3); (2) the continued
listing standards under Commentary .02
to NYSE Arca Rule 5.2–E(j)(3), as
applicable to Units based on fixed
income securities, will apply to the
Shares of the Fund; and (3) the issuer of
the Fund is required to comply with
Rule 10A–3 15 under the Act for the
initial and continued listing of the
Shares. The Exchange represents that
the Fund will comply with all other
requirements applicable to Units,
including, but not limited to,
requirements relating to the
dissemination of key information such
as the value of the Index and the
Intraday Indicative Value (‘‘IIV’’),16
rules governing the trading of equity
securities, trading hours, trading halts,
surveillance, information barriers and
the Information Bulletin, as set forth in
the Exchange rules applicable to Units
and prior Commission orders approving
the generic listing rules applicable to
the listing and trading of Units.17
Additional Information
The current value of the Index will be
widely disseminated by one or more
major market data vendors at least once
14 See
note 5, supra.
CFR 240.10A–3.
16 The IIV will be widely disseminated by one or
more major market data vendors at least every 15
seconds during the Exchange’s Core Trading
Session (normally, 9:30 a.m. to 4:00 p.m., E.T.).
Currently, it is the Exchange’s understanding that
several major market data vendors display and/or
make widely available IIV taken from CTA or other
data feeds.
17 See, e.g., Securities Exchange Act Release Nos.
55783 (May 17, 2007), 72 FR 29194 (May 24, 2007)
(SR–NYSEArca–2007–36) (order approving NYSE
Arca generic listing standards for Units based on a
fixed income index); 44551 (July 12, 2001), 66 FR
37716 (July 19, 2001) (SR–PCX–2001–14) (order
approving generic listing standards for Units and
Portfolio Depositary Receipts); 41983 (October 6,
1999), 64 FR 56008 (October 15, 1999) (SR–PCX–
98–29) (order approving rules for listing and trading
of Units).
15 17
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per day, as required by Commentary
.02(b)(ii) to NYSE Arca Rule 5.2–E(j)(3).
The portfolio of securities held by the
Fund will be disclosed daily on the
Fund’s website www.iShares.com.
Creation and Redemption of Shares
According to the Registration
Statement, the Fund will issue and
redeem Shares on a continuous basis at
the net asset value per Share (‘‘NAV’’)
only in a large specified number of
Shares called a ‘‘Creation Unit’’, or
multiples thereof, with each Creation
Unit consisting of 50,000 Shares,
provided, however, that from time to
time the Fund may change the number
of Shares (or multiples thereof) required
for each Creation Unit if the Fund
determines such a change would be in
the best interests of the Fund.
The consideration for purchase of
Creation Units of the Fund generally
will consist of the in-kind deposit of a
designated portfolio of securities
(including any portion of such securities
for which cash may be substituted),
which constitutes a representative
sample of the securities of the 2026
Index 18 (the ‘‘Deposit Securities’’) and a
cash component (the ‘‘Cash
Component’’) computed as described
below. Together, the Deposit Securities
and the Cash Component constitute the
‘‘Fund Deposit,’’ which represents the
minimum initial and subsequent
investment amount for a Creation Unit
of the Fund.
The portfolio of securities required for
purchase of a Creation Unit may not be
identical to the portfolio of securities
the Fund will deliver upon redemption
of the Fund’s Shares. The Deposit
Securities and Fund Securities (as
defined below), as the case may be, in
connection with a purchase or
redemption of a Creation Unit, generally
will correspond pro rata, to the extent
practicable, to the securities held by the
Fund. As the planned termination date
of the Fund approaches, and
particularly as the bonds held by the
Fund begin to mature, the Fund would
expect to effect both creations and
redemptions increasingly for cash.
The Cash Component will be an
amount equal to the difference between
18 According to the Registration Statement,
‘‘representative sampling’’ is an indexing strategy
that involves investing in a representative sample
of securities that collectively has an investment
profile similar to the 2026 Index. The securities
selected are expected to have, in the aggregate,
investment characteristics (based on factors such as
market capitalization and industry weightings),
fundamental characteristics (such as return
variability, duration, maturity or credit ratings and
yield) and liquidity measures similar to those of the
Index. The Fund may or may not hold all of the
securities in the 2026 Index.
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the NAV of the Shares (per Creation
Unit) and the ‘‘Deposit Amount,’’ which
will be an amount equal to the market
value of the Deposit Securities, and
serve to compensate for any differences
between the NAV per Creation Unit and
the Deposit Amount. The Fund
currently will offer Creation Units for
in-kind deposits but reserves the right to
utilize a ‘‘cash’’ option in lieu of some
or all of the applicable Deposit
Securities for creation of Shares.
BFA will make available through the
National Securities Clearing Corporation
(‘‘NSCC’’) on each business day, prior to
the opening of business on the
Exchange, the list of names and the
required number or par value of each
Deposit Security and the amount of the
Cash Component to be included in the
current Fund Deposit (based on
information as of the end of the
previous business day) for the Fund.
The identity and number or par value
of the Deposit Securities change
pursuant to changes in the composition
of the Fund’s portfolio and as
rebalancing adjustments and corporate
action events are reflected from time to
time by BFA with a view to the
investment objective of the Fund. The
composition of the Deposit Securities
may also change in response to
adjustments to the weighting or
composition of the component
securities constituting the 2026 Index.
The Fund reserves the right to permit
or require the substitution of a ‘‘cash in
lieu’’ amount to be added to the Cash
Component to replace any Deposit
Security that may not be available in
sufficient quantity for delivery or that
may not be eligible for transfer through
the Depository Trust Company (‘‘DTC’’)
or the clearing process through the
Continuous Net Settlement System of
the NSCC or that the Authorized
Participant is not able to trade due to a
trading restriction.
Creation Units may be purchased only
by or through a DTC participant that has
entered into an ‘‘Authorized Participant
Agreement’’ (as described in the
Registration Statement) with the
Distributor (an ‘‘Authorized
Participant’’). All creation orders must
be placed for one or more Creation Units
and must be received by the Distributor
in proper form no later than the closing
time of the regular trading session of the
Exchange (normally 4:00 p.m., Eastern
time (‘‘E.T.’’)) in each case on the date
such order is placed in order for
creation of Creation Units to be effected
based on the NAV of Shares of the Fund
as next determined on such date after
receipt of the order in proper form.
Shares of the Fund may be redeemed
only in Creation Units at the NAV next
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18:44 Oct 15, 2018
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determined after receipt of a redemption
request in proper form by the
Distributor and only on a business day.
BFA will make available through the
NSCC, prior to the opening of business
on the Exchange on each business day,
the designated portfolio of securities
(including any portion of such securities
for which cash may be substituted) that
will be applicable (subject to possible
amendment or correction) to
redemption requests received in proper
form on that day (the ‘‘Fund
Securities’’). Fund Securities received
on redemption may not be identical to
Deposit Securities that are applicable to
creations of Creation Units.
Unless cash redemptions are available
or specified for the Fund, the
redemption proceeds for a Creation Unit
generally will consist of a specified
amount of cash, Fund Securities, plus
additional cash in an amount equal to
the difference between the NAV of the
Shares being redeemed, as next
determined after the receipt of a request
in proper form, and the value of the
specified amount of cash and Fund
Securities, less a redemption transaction
fee. The Fund currently will redeem
Shares for Fund Securities, but reserves
the right to utilize a ‘‘cash’’ option for
redemption of Shares.
Redemption requests for Creation
Units of the Fund must be submitted to
the Distributor by or through an
Authorized Participant no later than
4:00 p.m. E.T. on any business day, in
order to receive that day’s NAV. The
Authorized Participant must transmit
the request for redemption in the form
required by the Fund to the Distributor
in accordance with procedures set forth
in the Authorized Participant
Agreement.
Availability of Information
On each business day, the Fund will
disclose on its website
(www.iShares.com) the portfolio that
will form the basis for the Fund’s
calculation of NAV at the end of the
business day.
On a daily basis, the Fund will
disclose for each portfolio security or
other financial instrument of the Fund
the following information on the Fund’s
website: Ticker symbol (if applicable),
name of security and financial
instrument, a common identifier such as
CUSIP or ISIN (if applicable), number of
shares (if applicable), and dollar value
of securities and financial instruments
held in the portfolio, and percentage
weighting of the security and financial
instrument in the portfolio. The website
information will be publicly available at
no charge. The current value of the
Index will be widely disseminated by
PO 00000
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52269
one or more major market data vendors
at least once per day, as required by
NYSE Arca Rule 5.2–E(j)(3),
Commentary .02(b)(ii).
The IIV for Shares of the Fund will be
disseminated by one or more major
market data vendors, updated at least
every 15 seconds during the Exchange’s
Core Trading Session, as required by
NYSE Arca Rule 5.2–E(j)(3),
Commentary .02(c). The current value of
the Index would be widely
disseminated by one or more major
market data vendors at least once per
day, as required by NYSE Arca Rule
5.2–(j)(3), Commentary .02 (b)(ii). In
addition, the portfolio of securities held
by the Fund will be disclosed daily on
the Fund’s website.
Investors can also obtain the Trust’s
Statement of Additional Information
(‘‘SAI’’), the Fund’s Shareholder
Reports, and its Form N–CSR and Form
N–SAR, filed twice a year. The Trust’s
SAI and Shareholder Reports are
available free upon request from the
Trust, and those documents and the
Form N–CSR and Form N–SAR may be
viewed on-screen or downloaded from
the Commission’s website at
www.sec.gov. Information regarding
market price and trading volume of the
Shares will be continually available on
a real-time basis throughout the day on
brokers’ computer screens and other
electronic services. Information
regarding the previous day’s closing
price and trading volume information
for the Shares will be published daily in
the financial section of newspapers.
Quotation and last sale information
for the Shares of the Fund will be
available via the Consolidated Tape
Association (‘‘CTA’’) high speed line.
Quotation information for investment
company securities may be obtained
through nationally recognized pricing
services through subscription
agreements or from brokers and dealers
who make markets in such securities.
Price information regarding municipal
bonds is available from third party
pricing services and major market data
vendors. Trade price and other
information relating to municipal bonds
is available through the Municipal
Securities Rulemaking Board’s
Electronic Municipal Market Access
(‘‘EMMA’’) system.
Quotation information for OTC swaps
agreements may be obtained from
brokers and dealers who make markets
in such instruments. Quotation
information for exchange-traded swaps,
futures and options will be available
from the applicable exchange and/or
major market vendors.
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Surveillance
The Exchange represents that trading
in the Shares of the Fund will be subject
to the existing trading surveillances,
administered by the Financial Industry
Regulatory Authority (‘‘FINRA’’) on
behalf of the Exchange, or by regulatory
staff of the Exchange, which are
designed to detect violations of
Exchange rules and applicable federal
securities laws. The Exchange
represents that these procedures are
adequate to properly monitor Exchange
trading of the Shares of the Fund in all
trading sessions and to deter and detect
violations of Exchange rules and federal
securities laws applicable to trading on
the Exchange.19
The surveillances referred to above
generally focus on detecting securities
trading outside their normal patterns,
which could be indicative of
manipulative or other violative activity.
When such situations are detected,
surveillance analysis follows and
investigations are opened, where
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations.
The Exchange or FINRA, on behalf of
the Exchange, or both, will
communicate as needed regarding
trading in the Shares, certain futures
and certain options with other markets
and other entities that are members of
the Intermarket Surveillance Group
(‘‘ISG’’), and the Exchange or FINRA, on
behalf of the Exchange, or both, may
obtain trading information regarding
trading in the Shares, certain futures
and certain options from such markets
and other entities. In addition, the
Exchange may obtain information
regarding trading in the Shares, certain
futures and certain options from
markets and other entities that are
members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement. FINRA
also can access data obtained from the
Municipal Securities Rulemaking Board
relating to municipal bond trading
activity for surveillance purposes in
connection with trading in the Shares.
The Exchange represents that at least
90% of the weight of Fund holdings
invested in exchange-traded futures
contracts and exchange-traded options
will be traded on an exchange that is a
member of the ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with Section 6(b)
of the Act 20 in general and Section
6(b)(5) of the Act 21 in particular in that
it is designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, to protect investors and the
public interest.
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices in that the Shares of
the Fund will be listed and traded on
the Exchange pursuant to the initial and
continued listing criteria in NYSE Arca
Rule 5.2–E(j)(3), except for the
requirement in Commentary .02(a)(2)
that the component fixed income
securities, in the aggregate, account for
at least 75% of the weight of the index
each shall have a minimum principal
amount outstanding of $100 million or
more. The Exchange represents that
trading in the Shares will be subject to
the existing trading surveillances
administered by the Exchange as well as
cross-market surveillances administered
by FINRA on behalf of the Exchange,
which are designed to detect violations
of Exchange rules and federal securities
laws applicable to trading on the
Exchange.22 The Exchange represents
that these procedures are adequate to
properly monitor Exchange trading of
the Shares in all trading sessions and to
deter and detect violations of Exchange
rules and federal securities laws
applicable to trading on the Exchange.
The Exchange or FINRA, on behalf of
the Exchange, or both, will
communicate as needed regarding
trading in the Shares, certain futures
and certain options with other markets
that are members of the ISG. In addition,
the Exchange will communicate as
needed regarding trading in the Shares,
certain futures and certain options with
other markets that are members of the
ISG or with which the Exchange has in
place a comprehensive surveillance
sharing agreement. FINRA also can
access data obtained from the Municipal
Securities Rulemaking Board relating to
20 15
U.S.C. 78f.
U.S.C. 78f(b)(5).
22 FINRA conducts cross-market surveillances on
behalf of the Exchange pursuant to a regulatory
services agreement. The Exchange is responsible for
FINRA’s performance under this regulatory services
agreement.
21 15
19 FINRA conducts cross-market surveillances on
behalf of the Exchange pursuant to a regulatory
services agreement. The Exchange is responsible for
FINRA’s performance under this regulatory services
agreement.
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municipal bond trading activity for
surveillance purposes in connection
with trading in the Shares of the Fund.
At least 90% of the weight of Fund
holdings invested in exchange-traded
futures contracts and exchange-traded
options will be traded on an exchange
that is a member of the ISG or with
which the Exchange has in place a
comprehensive surveillance sharing
agreement.
As discussed above, the Exchange
believes that the Index is sufficiently
broad-based to deter potential
manipulation. For informational
purposes, as of April 30, 2018, 76.30%
of the weight of the 2026 Index
components was comprised of
individual maturities that were part of
an entire municipal bond offering with
a minimum original principal amount
outstanding of $100 million or more for
all maturities of the offering. In
addition, the total dollar amount
outstanding of issues in the 2026 Index
was approximately $30.8 billion, the
total market value of issues in the 2026
Index was $35.2 billion, and the average
dollar amount outstanding of issues in
the 2026 Index was approximately
$10,579,000. Further, the most heavily
weighted component represented 1.36%
of the weight of the 2026 Index and the
five most heavily weighted components
represented 4.24% of the weight of the
2026 Index.23 Therefore, the Exchange
believes that, notwithstanding that the
2026 Index does not satisfy the criterion
in NYSE Arca Rule 5.2–E(j)(3),
Commentary .02(a)(2), the 2026 Index is
sufficiently broad-based to deter
potential manipulation, given that it is
comprised of approximately 3,331
issues.
On a continuous basis, (1) the Index
will contain at least 500 components;
and (2) each of the components of the
Index will have an outstanding par
value of at least $2 million. As noted
above, in the iShares Orders, the
Commission approved Exchange listing
and trading of Units for which each
bond in the applicable underlying index
must have a minimum maturity par
amount of $2 million to be eligible for
inclusion in such index, and each such
index included at least 500
components.24 In each of the iShares
Orders, the Commission stated that the
23 Commentary .02(a)(4) to NYSE Arca Rule 5.2–
E(j)(3) provides that no component fixed-income
security (excluding Treasury Securities and GSE
Securities, as defined therein) shall represent more
than 30% of the weight of the index or portfolio,
and the five most heavily weighted component
fixed-income securities in the index or portfolio
shall not in the aggregate account for more than
65% of the weight of the index or portfolio.
24 See note 5, supra.
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applicable index was sufficiently broadbased and liquid to deter potential
manipulation.25
The proposed rule change is designed
to promote just and equitable principles
of trade and to protect investors and the
public interest in that a large amount of
information will be publicly available
regarding the Fund and the Shares,
thereby promoting market transparency.
The Fund’s portfolio holdings will be
disclosed on the Fund’s website daily
after the close of trading on the
Exchange. Moreover, the IIV will be
widely disseminated by one or more
major market data vendors at least every
15 seconds during the Exchange’s Core
Trading Session. The current value of
the Index will be disseminated by one
or more major market data vendors at
least once per day. Information
regarding market price and trading
volume of the Shares will be continually
available on a real-time basis throughout
the day on brokers’ computer screens
and other electronic services, and
quotation and last sale information will
be available via the CTA high-speed
line. The website for the Fund will
include the prospectus for the Fund and
additional data relating to NAV and
other applicable quantitative
information. Moreover, prior to the
commencement of trading, the Exchange
will inform its ETP Holders in an
Information Bulletin of the special
characteristics and risks associated with
trading the Shares.
If the Exchange becomes aware that
the NAV is not being disseminated to all
market participants at the same time, it
will halt trading in the Shares until such
time as the NAV is available to all
market participants. With respect to
trading halts, the Exchange may
consider all relevant factors in
exercising its discretion to halt or
suspend trading in the Shares of the
Fund. Trading also may be halted
because of market conditions or for
reasons that, in the view of the
Exchange, make trading in the Shares
inadvisable. If the IIV or the Index value
is not being disseminated as required,
the Exchange may halt trading during
the day in which the interruption to the
dissemination of the IIV or Index value
occurs. If the interruption to the
dissemination of the IIV or Index value
persists past the trading day in which it
occurred, the Exchange will halt
trading. Trading in Shares of the Fund
will be halted if the circuit breaker
parameters in NYSE Arca Rule 7.12–E
have been reached or because of market
conditions or for reasons that, in the
view of the Exchange, make trading in
25 See
the iShares Orders, note 5, supra.
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18:44 Oct 15, 2018
Jkt 247001
the Shares inadvisable, and trading in
the Shares will be subject to NYSE Arca
Rule 7.34–E, which sets forth
circumstances under which Shares of
the Fund may be halted. In addition,
investors will have ready access to
information regarding the IIV, and
quotation and last sale information for
the Shares.
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest in that
it will facilitate the listing and trading
of an additional type of exchange-traded
fund that holds municipal bonds and
that will enhance competition among
market participants, to the benefit of
investors and the marketplace. As noted
above, the Exchange has in place
surveillance procedures relating to
trading in the Shares and may obtain
information via ISG from other
exchanges that are members of ISG or
with which the Exchange has entered
into a comprehensive surveillance
sharing agreement. In addition,
investors will have ready access to
information regarding the IIV and
quotation and last sale information for
the Shares.
For the above reasons, the Exchange
believes that the proposed rule change
is consistent with the requirements of
Section 6(b)(5) of the Act.26
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purpose of the Act. The Exchange
notes that the proposed rule change will
facilitate the listing and trading of an
additional type of Units based on a
municipal bond index that will enhance
competition among market participants,
to the benefit of investors and the
marketplace.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
26 15
PO 00000
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Frm 00084
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52271
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 27 and Rule 19b–
4(f)(6) thereunder.28
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 29 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 30
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has
requested that the Commission waive
the 30-day operative delay so that the
proposed rule change may become
operative upon filing. The Exchange
states that waiver of the 30-day delayed
operative date is consistent with the
protection of investors and the public
interest because the Commission has
previously approved listing and trading
of Units based on indexes with similar
characteristics as those of the Index.31
Additionally, the Exchange asserts that
waiver will permit the prompt listing
and trading of an additional issue of
Units that principally holds municipal
securities, which will enhance
competition among issuers, investment
advisers and other market participants
with respect to listing and trading of
issues of Units that hold municipal
securities. The Commission believes
that the proposal raises no new or novel
regulatory issues and waiver of the 30day operative delay is consistent with
the protection of investors and the
public interest. The Commission
therefore waives the 30-day operative
delay and designates the proposed rule
change to be operative upon filing.32
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
27 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). As required under Rule
19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission.
29 17 CFR 240.19b–4(f)(6).
30 17 CFR 240.19b–4(f)(6)(iii).
31 See supra note 5.
32 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
28 17
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Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEARCA–2018–70 on the subject
line.
amozie on DSK3GDR082PROD with NOTICES1
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEARCA–2018–70. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSEARCA–2018–70, and
VerDate Sep<11>2014
18:44 Oct 15, 2018
Jkt 247001
should be submitted on or before
November 6, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
Eduardo A. Aleman,
Assistant Secretary.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–22433 Filed 10–15–18; 8:45 am]
BILLING CODE 8011–01–P
[FR Doc. 2018–22428 Filed 10–15–18; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–84397; File No. SR–
PEARL–2018–16]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Withdrawal of
a Proposed Rule Change To Amend
the Fee Schedule Regarding
Connectivity Fees for Members and
Non-Members
October 10, 2018.
On July 31, 2018, MIAX PEARL, LLC
(‘‘MIAX PEARL’’ or the ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’),1 and
Rule 19b–4 thereunder,2 a proposed rule
change to amend the MIAX PEARL Fee
Schedule to increase certain
connectivity fees. The proposed rule
change was immediately effective upon
filing with the Commission pursuant to
Section 19(b)(3)(A) of the Act.3 The
proposed rule change was published for
comment in the Federal Register on
August 13, 2018.4 The Commission
received one comment letter on the
proposal.5 On September 17, 2018,
pursuant to Section 19(b)(3)(C) of the
Act, the Commission: (1) Temporarily
suspended the proposed rule change;
and (2) instituted proceedings to
determine whether to approve or
disapprove the proposal.6 On October 5,
2018, the Exchange withdrew the
proposed rule change (SR–PEARL–
2018–16).
33 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 See Securities Exchange Act Release No. 83785
(August 7, 2018), 83 FR 40101.
5 See Letter from Tyler Gellasch, Executive
Director, The Healthy Markets Association, to Brent
J. Fields, Secretary, Commission, dated September
4, 2018.
6 See Securities Exchange Act Release No. 84177,
83 FR 47953 (September 21, 2018).
1 15
PO 00000
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[Release No. 34–84389; File No. SR–
NYSEARCA–2018–71]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of
Amendments to Rules Regarding
Qualification, Registration and
Continuing Education Applicable to
Equity Trading Permit Holders,
Options Trading Permit Holders or
OTP Firms
October 10, 2018.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
September 27, 2018, NYSE Arca, Inc.
(the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes amendments
to the Exchange’s rules regarding
qualification, registration and
continuing education requirements
applicable to Equity Trading Permit
(‘‘ETP’’) Holders, Options Trading
Permit (‘‘OTP’’) Holders or OTP Firms.
The Exchange’s rule proposal is
intended to harmonize its rules with
Financial Regulatory Authority, Inc.
(‘‘FINRA’’) rules and thus promote
consistency within the securities
industry, and therefore the Exchange is
only adopting rules that are relevant to
the Exchange’s ETP Holders, OTP
Holders or OTP Firms. The Exchange is
not adopting registration categories that
are not applicable to ETP Holders, OTP
Holders or OTP Firms because they do
not engage in the type of business that
7 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 83, Number 200 (Tuesday, October 16, 2018)]
[Notices]
[Pages 52266-52272]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-22428]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84396; File No. SR-NYSEARCA-2018-70]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Relating To Listing
and Trading of Shares of the iShares iBond Dec 2026 Term Muni Bond ETF
Under Commentary .02 to NYSE Arca Rule 5.2-E(j)(3)
October 10, 2018.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on September 26, 2018, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade shares of the iShares iBond
Dec 2026 Term Muni Bond ETF (the ``Fund'') pursuant to NYSE Arca Rule
5.2-E(j)(3), Commentary .02. The proposed rule change is available on
the Exchange's website at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
[[Page 52267]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade shares (``Shares'') of the
Fund under Commentary .02 to NYSE Arca Rule 5.2-E(j)(3), which governs
the listing and trading of Investment Company Units (``Units'') \4\
based on fixed income securities indexes.\5\ As discussed below, the
Exchange is submitting this proposed rule change because the ``Index''
(as defined below) does not meet all of the ``generic'' listing
requirements of Commentary .02 to NYSE Arca Rule 5.2-E(j)(3) applicable
to the listing of Units based on fixed income securities indexes. The
Index meets all such requirements except for those set forth in
Commentary .02(a)(2).\6\
---------------------------------------------------------------------------
\4\ An open-end investment company that issues Units, listed and
traded on the Exchange under NYSE Arca Rule 5.2-E(j)(3), seeks to
provide investment results that correspond generally to the price
and yield performance of a specific foreign or domestic stock index,
fixed income securities index or combination thereof.
\5\ The Commission previously has approved proposed rule changes
relating to listing and trading of funds based on municipal bond
indexes. See, e.g., Securities Exchange Act Release Nos. 67985
(October 4, 2012), 77 FR 61804 (October 11, 2012) (SR-NYSEArca-2012-
92) (order approving proposed rule change to list and trade the
iShares 2018 S&P AMT-Free Municipal Series and iShares 2019 S&P AMT-
Free Municipal Series under NYSE Arca Rule 5.2(j)(3), Commentary
.02) (``iShares 2018/2019 Order''); 72523 (July 2, 2014), 79 FR
39016 (July 9, 2014) (SR-NYSEArca-2014-37) (order approving proposed
rule change to list and trade iShares 2020 S&P AMT-Free Municipal
Series under NYSE Arca Rule 5.2(j)(3), Commentary .02) (``iShares
2020 Order''); and 75468 (July 16, 2015), 80 FR 43500 (July 22,
2015) (SR-NYSEArca-2015-25) (order approving proposed rule change to
list and trade the iShares iBonds Dec 2021 AMT-Free Muni Bond ETF
and iShares iBonds Dec 2022 AMT-Free Muni Bond ETF under NYSE Arca
Rule 5.2(j)(3), Commentary .02) (``iShares 2021/2022 Order'' and,
together with the iShares 2018/2019 Order and the iShares 2020
Order, the ``iShares Orders''); 82295 (December 12, 2017), 82 FR
60056 (December 18, 2017) (SR-NYSEArca-2017-56) (Notice of Filing of
Amendment No. 3 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 3, to List and
Trade Shares of Twelve Series of Investment Company Units Pursuant
to NYSE Arca Rule 5.2-E(j)(3)).
\6\ Commentary .02(a)(2) provides that Fixed Income Security
components that in aggregate account for at least 75% of the Fixed
Income Securities portion of the weight of the index or portfolio
each shall have a minimum original principal amount outstanding of
$100 million or more.
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Description of the Shares and the Fund
The Fund is a series of the iShares Trust (the ``Trust'').\7\
Blackrock Fund Advisors (``BFA'') will be the investment advisor for
the Fund.\8\ State Street Bank and Trust Company will serve as the
custodian, administrator, and transfer agent for the Fund. Blackrock
Investments, LLC will act as the distributor for the Fund's Shares.
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\7\ The Trust is registered under the Investment Company Act of
1940 (15 U.S.C. 80a) (``1940 Act''). On June 29, 2018, the Trust
filed with the Commission its registration statement on Form N-1A
under the Securities Act of 1933 (15 U.S.C. 77a), and under the 1940
Act relating to the Fund (File Nos. 333-92935 and 811-09729)
(``Registration Statement''). The description of the operation of
the Trust and the Fund herein is based, in part, on the Registration
Statement. In addition, the Commission has issued an order granting
certain exemptive relief to the Trust under the 1940 Act. See
Investment Company Act Release No. 27661, (January 17, 2007) (File
No. 812-13208).
\8\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (the ``Advisers
Act''). As a result, BFA and its related personnel are subject to
the provisions of Rule 204A-1 under the Advisers Act relating to
codes of ethics. This Rule requires investment advisers to adopt a
code of ethics that reflects the fiduciary nature of the
relationship to clients as well as compliance with other applicable
securities laws. Accordingly, procedures designed to prevent the
communication and misuse of non-public information by an investment
adviser must be consistent with Rule 204A-1 under the Advisers Act.
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment advice to clients
unless such investment adviser has (i) adopted and implemented
written policies and procedures reasonably designed to prevent
violation, by the investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review regarding the adequacy
of the policies and procedures established pursuant to subparagraph
(i) above and the effectiveness of their implementation; and (iii)
designated an individual (who is a supervised person) responsible
for administering the policies and procedures adopted under
subparagraph (i) above.
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S&P AMT-Free Municipal Series Dec 2026 Index\TM\
According to the Registration Statement, the investment objective
of the Fund is to track the investment results of an index composed of
investment-grade U.S. municipal bonds maturing after December 31, 2025
and before December 2, 2026. Specifically, the Fund will seek to track
the investment results (before fees and expenses) of the S&P AMT-Free
Municipal Series December 2026 Index\TM\ (the ``2026 Index''), which
measures the performance of investment-grade, non-callable U.S.
municipal bonds maturing in 2026.\9\ As of July 13, 2018, there were
3,331 issues in the 2026 Index.
---------------------------------------------------------------------------
\9\ The 2026 Index is a product of S&P Dow Jones Indices LLC
(the ``Index Provider''), which is independent of the Fund and BFA.
The Index Provider determines the composition and relative
weightings of the securities in the 2026 Index and publishes
information regarding the market value of the 2026 Index. The Index
Provider is not a broker-dealer or affiliated with a broker-dealer
and has implemented procedures designed to prevent the use and
dissemination of material, non-public information regarding the 2026
Index.
---------------------------------------------------------------------------
The 2026 Index includes municipal bonds primarily from issuers that
are state or local governments or agencies such that the interest on
the bonds is exempt from U.S. federal income taxes. Each bond must
have, inter alia, a minimum maturity par amount of $2 million to be
eligible for inclusion in the 2026 Index. To remain in the 2026 Index,
bonds must maintain a minimum par amount greater than or equal to $2
million, and must not be subject to the federal alternative minimum tax
(``AMT'') as of each rebalancing date. All bonds in the 2026 Index will
mature after December 31, 2025 and before December 2, 2026. Bonds in
the 2026 Index that mature or are pre-refunded in their respective year
of maturity do not accrue interest past the maturity or pre-refund
date. All payments related to the maturity or pre-refunding of a bond
are reinvested in tax-exempt cash or cash equivalents for the duration
of each month.
The Fund will generally invest, under normal market conditions,\10\
at least 90% of its assets in component securities of the 2026 Index,
except during the last months of the Fund's operations, as described
below. From time to time when conditions warrant, however, the Fund may
invest, under normal market conditions, at least 80% of its assets in
the component securities of the 2026 Index.
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\10\ The term ``under normal market conditions'' as used herein
includes, but is not limited to, the absence of adverse market,
economic, political or other conditions, including extreme
volatility or trading halts in the fixed income markets or the
financial markets generally; operational issues (such as systems
failure) causing dissemination of inaccurate market information; or
force majeure type events, natural or man-made disaster, act of God,
armed conflict, act of terrorism, riot or labor disruption or any
similar intervening circumstance.
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The Fund may invest the remainder of its assets in interest rate
futures, interest rate options, interest rate swaps,\11\ cash and cash
equivalents (including shares of money market funds affiliated with
BFA), as well as in municipal securities not included in the 2026
Index, but which BFA believes will help the Fund track the 2026 Index.
The Fund will generally hold municipal securities issued by state and
local municipalities whose interest payments are exempt from U.S.
federal income tax, the federal AMT and the federal Medicare
contribution tax. In the last months of operation, as the bonds held by
the Fund mature, the proceeds will not be reinvested in bonds but
instead will be held in cash and cash equivalents, including, without
limitation, shares of
[[Page 52268]]
money market funds affiliated with BFA, AMT-free tax-exempt municipal
notes, variable rate demand notes and obligations, tender option bonds
and municipal commercial paper. These cash equivalents may not be
included in the 2026 Index. Around December 2, 2026, the Fund will wind
up and terminate, and its net assets will be distributed to then
current shareholders.
---------------------------------------------------------------------------
\11\ The interest rate futures, interest rate options, and
interest rate swaps will be centrally cleared and they will be
collateralized.
---------------------------------------------------------------------------
For informational purposes, as of April 30, 2018, 76.30% of the
weight of the 2026 Index components was comprised of individual
maturities that were part of an entire municipal bond offering with a
minimum original principal amount outstanding of $100 million or more
for all maturities of the offering. In addition, the total dollar
amount outstanding of issues in the 2026 Index was approximately $30.8
billion, the total market value of issues in the 2026 Index was $35.2
billion, and the average dollar amount outstanding of issues in the
2026 Index was approximately $10,579,000. Further, the most heavily
weighted component represented 1.36% of the weight of the 2026 Index
and the five most heavily weighted components represented 4.24% of the
weight of the 2026 Index.\12\ Therefore, the Exchange believes that,
notwithstanding that the 2026 Index does not satisfy the criterion in
NYSE Arca Rule 5.2-E(j)(3), Commentary .02(a)(2), the 2026 Index is
sufficiently broad-based to deter potential manipulation, given that it
is comprised of approximately 3,331 issues.
---------------------------------------------------------------------------
\12\ Commentary .02(a)(4) to NYSE Arca Rule 5.2-E(j)(3) provides
that no component fixed-income security (excluding Treasury
Securities and GSE Securities, as defined therein) shall represent
more than 30% of the weight of the index or portfolio, and the five
most heavily weighted component fixed-income securities in the index
or portfolio shall not in the aggregate account for more than 65% of
the weight of the index or portfolio.
---------------------------------------------------------------------------
The Exchange is submitting this proposed rule change because the
2026 Index for the Fund does not meet all of the ``generic'' listing
requirements of Commentary .02(a) to NYSE Arca Rule 5.2-E(j)(3)
applicable to the listing of Units based on fixed income securities
indexes. The 2026 Index meets all such requirements except for those
set forth in Commentary .02(a)(2).\13\ Specifically, as of April 30,
2018, 9.43% of the weight of the 2026 Index components have a minimum
original principal amount outstanding of $100 million or more.
---------------------------------------------------------------------------
\13\ Commentary .02(a)(2) to NYSE Arca Rule 5.2-E(j)(3) provides
that components that in the aggregate account for at least 75% of
the weight of the index or portfolio each shall have a minimum
original principal amount outstanding of $100 million or more.
---------------------------------------------------------------------------
Requirement for Index Constituents
On a continuous basis, (1) the Index will contain at least 500
components; and (2) each of the components of the Index will have an
outstanding par value of at least $2 million.
The Exchange notes that, in the iShares Orders, the Commission
approved Exchange listing and trading of Units for which each bond in
the applicable underlying index must have a minimum maturity par amount
of $2 million to be eligible for inclusion in such index, and each such
index included at least 500 components.\14\
---------------------------------------------------------------------------
\14\ See note 5, supra.
---------------------------------------------------------------------------
In addition, the Exchange represents that: (1) Except for
Commentary .02(a)(2) to Rule 5.2-E(j)(3), the 2026 Index currently
satisfies all of the generic listing standards under NYSE Arca Rule
5.2-E(j)(3); (2) the continued listing standards under Commentary .02
to NYSE Arca Rule 5.2-E(j)(3), as applicable to Units based on fixed
income securities, will apply to the Shares of the Fund; and (3) the
issuer of the Fund is required to comply with Rule 10A-3 \15\ under the
Act for the initial and continued listing of the Shares. The Exchange
represents that the Fund will comply with all other requirements
applicable to Units, including, but not limited to, requirements
relating to the dissemination of key information such as the value of
the Index and the Intraday Indicative Value (``IIV''),\16\ rules
governing the trading of equity securities, trading hours, trading
halts, surveillance, information barriers and the Information Bulletin,
as set forth in the Exchange rules applicable to Units and prior
Commission orders approving the generic listing rules applicable to the
listing and trading of Units.\17\
---------------------------------------------------------------------------
\15\ 17 CFR 240.10A-3.
\16\ The IIV will be widely disseminated by one or more major
market data vendors at least every 15 seconds during the Exchange's
Core Trading Session (normally, 9:30 a.m. to 4:00 p.m., E.T.).
Currently, it is the Exchange's understanding that several major
market data vendors display and/or make widely available IIV taken
from CTA or other data feeds.
\17\ See, e.g., Securities Exchange Act Release Nos. 55783 (May
17, 2007), 72 FR 29194 (May 24, 2007) (SR-NYSEArca-2007-36) (order
approving NYSE Arca generic listing standards for Units based on a
fixed income index); 44551 (July 12, 2001), 66 FR 37716 (July 19,
2001) (SR-PCX-2001-14) (order approving generic listing standards
for Units and Portfolio Depositary Receipts); 41983 (October 6,
1999), 64 FR 56008 (October 15, 1999) (SR-PCX-98-29) (order
approving rules for listing and trading of Units).
---------------------------------------------------------------------------
Additional Information
The current value of the Index will be widely disseminated by one
or more major market data vendors at least once per day, as required by
Commentary .02(b)(ii) to NYSE Arca Rule 5.2-E(j)(3). The portfolio of
securities held by the Fund will be disclosed daily on the Fund's
website www.iShares.com.
Creation and Redemption of Shares
According to the Registration Statement, the Fund will issue and
redeem Shares on a continuous basis at the net asset value per Share
(``NAV'') only in a large specified number of Shares called a
``Creation Unit'', or multiples thereof, with each Creation Unit
consisting of 50,000 Shares, provided, however, that from time to time
the Fund may change the number of Shares (or multiples thereof)
required for each Creation Unit if the Fund determines such a change
would be in the best interests of the Fund.
The consideration for purchase of Creation Units of the Fund
generally will consist of the in-kind deposit of a designated portfolio
of securities (including any portion of such securities for which cash
may be substituted), which constitutes a representative sample of the
securities of the 2026 Index \18\ (the ``Deposit Securities'') and a
cash component (the ``Cash Component'') computed as described below.
Together, the Deposit Securities and the Cash Component constitute the
``Fund Deposit,'' which represents the minimum initial and subsequent
investment amount for a Creation Unit of the Fund.
---------------------------------------------------------------------------
\18\ According to the Registration Statement, ``representative
sampling'' is an indexing strategy that involves investing in a
representative sample of securities that collectively has an
investment profile similar to the 2026 Index. The securities
selected are expected to have, in the aggregate, investment
characteristics (based on factors such as market capitalization and
industry weightings), fundamental characteristics (such as return
variability, duration, maturity or credit ratings and yield) and
liquidity measures similar to those of the Index. The Fund may or
may not hold all of the securities in the 2026 Index.
---------------------------------------------------------------------------
The portfolio of securities required for purchase of a Creation
Unit may not be identical to the portfolio of securities the Fund will
deliver upon redemption of the Fund's Shares. The Deposit Securities
and Fund Securities (as defined below), as the case may be, in
connection with a purchase or redemption of a Creation Unit, generally
will correspond pro rata, to the extent practicable, to the securities
held by the Fund. As the planned termination date of the Fund
approaches, and particularly as the bonds held by the Fund begin to
mature, the Fund would expect to effect both creations and redemptions
increasingly for cash.
The Cash Component will be an amount equal to the difference
between
[[Page 52269]]
the NAV of the Shares (per Creation Unit) and the ``Deposit Amount,''
which will be an amount equal to the market value of the Deposit
Securities, and serve to compensate for any differences between the NAV
per Creation Unit and the Deposit Amount. The Fund currently will offer
Creation Units for in-kind deposits but reserves the right to utilize a
``cash'' option in lieu of some or all of the applicable Deposit
Securities for creation of Shares.
BFA will make available through the National Securities Clearing
Corporation (``NSCC'') on each business day, prior to the opening of
business on the Exchange, the list of names and the required number or
par value of each Deposit Security and the amount of the Cash Component
to be included in the current Fund Deposit (based on information as of
the end of the previous business day) for the Fund.
The identity and number or par value of the Deposit Securities
change pursuant to changes in the composition of the Fund's portfolio
and as rebalancing adjustments and corporate action events are
reflected from time to time by BFA with a view to the investment
objective of the Fund. The composition of the Deposit Securities may
also change in response to adjustments to the weighting or composition
of the component securities constituting the 2026 Index.
The Fund reserves the right to permit or require the substitution
of a ``cash in lieu'' amount to be added to the Cash Component to
replace any Deposit Security that may not be available in sufficient
quantity for delivery or that may not be eligible for transfer through
the Depository Trust Company (``DTC'') or the clearing process through
the Continuous Net Settlement System of the NSCC or that the Authorized
Participant is not able to trade due to a trading restriction.
Creation Units may be purchased only by or through a DTC
participant that has entered into an ``Authorized Participant
Agreement'' (as described in the Registration Statement) with the
Distributor (an ``Authorized Participant''). All creation orders must
be placed for one or more Creation Units and must be received by the
Distributor in proper form no later than the closing time of the
regular trading session of the Exchange (normally 4:00 p.m., Eastern
time (``E.T.'')) in each case on the date such order is placed in order
for creation of Creation Units to be effected based on the NAV of
Shares of the Fund as next determined on such date after receipt of the
order in proper form.
Shares of the Fund may be redeemed only in Creation Units at the
NAV next determined after receipt of a redemption request in proper
form by the Distributor and only on a business day. BFA will make
available through the NSCC, prior to the opening of business on the
Exchange on each business day, the designated portfolio of securities
(including any portion of such securities for which cash may be
substituted) that will be applicable (subject to possible amendment or
correction) to redemption requests received in proper form on that day
(the ``Fund Securities''). Fund Securities received on redemption may
not be identical to Deposit Securities that are applicable to creations
of Creation Units.
Unless cash redemptions are available or specified for the Fund,
the redemption proceeds for a Creation Unit generally will consist of a
specified amount of cash, Fund Securities, plus additional cash in an
amount equal to the difference between the NAV of the Shares being
redeemed, as next determined after the receipt of a request in proper
form, and the value of the specified amount of cash and Fund
Securities, less a redemption transaction fee. The Fund currently will
redeem Shares for Fund Securities, but reserves the right to utilize a
``cash'' option for redemption of Shares.
Redemption requests for Creation Units of the Fund must be
submitted to the Distributor by or through an Authorized Participant no
later than 4:00 p.m. E.T. on any business day, in order to receive that
day's NAV. The Authorized Participant must transmit the request for
redemption in the form required by the Fund to the Distributor in
accordance with procedures set forth in the Authorized Participant
Agreement.
Availability of Information
On each business day, the Fund will disclose on its website
(www.iShares.com) the portfolio that will form the basis for the Fund's
calculation of NAV at the end of the business day.
On a daily basis, the Fund will disclose for each portfolio
security or other financial instrument of the Fund the following
information on the Fund's website: Ticker symbol (if applicable), name
of security and financial instrument, a common identifier such as CUSIP
or ISIN (if applicable), number of shares (if applicable), and dollar
value of securities and financial instruments held in the portfolio,
and percentage weighting of the security and financial instrument in
the portfolio. The website information will be publicly available at no
charge. The current value of the Index will be widely disseminated by
one or more major market data vendors at least once per day, as
required by NYSE Arca Rule 5.2-E(j)(3), Commentary .02(b)(ii).
The IIV for Shares of the Fund will be disseminated by one or more
major market data vendors, updated at least every 15 seconds during the
Exchange's Core Trading Session, as required by NYSE Arca Rule 5.2-
E(j)(3), Commentary .02(c). The current value of the Index would be
widely disseminated by one or more major market data vendors at least
once per day, as required by NYSE Arca Rule 5.2-(j)(3), Commentary .02
(b)(ii). In addition, the portfolio of securities held by the Fund will
be disclosed daily on the Fund's website.
Investors can also obtain the Trust's Statement of Additional
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder
Reports are available free upon request from the Trust, and those
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or
downloaded from the Commission's website at www.sec.gov. Information
regarding market price and trading volume of the Shares will be
continually available on a real-time basis throughout the day on
brokers' computer screens and other electronic services. Information
regarding the previous day's closing price and trading volume
information for the Shares will be published daily in the financial
section of newspapers.
Quotation and last sale information for the Shares of the Fund will
be available via the Consolidated Tape Association (``CTA'') high speed
line. Quotation information for investment company securities may be
obtained through nationally recognized pricing services through
subscription agreements or from brokers and dealers who make markets in
such securities. Price information regarding municipal bonds is
available from third party pricing services and major market data
vendors. Trade price and other information relating to municipal bonds
is available through the Municipal Securities Rulemaking Board's
Electronic Municipal Market Access (``EMMA'') system.
Quotation information for OTC swaps agreements may be obtained from
brokers and dealers who make markets in such instruments. Quotation
information for exchange-traded swaps, futures and options will be
available from the applicable exchange and/or major market vendors.
[[Page 52270]]
Surveillance
The Exchange represents that trading in the Shares of the Fund will
be subject to the existing trading surveillances, administered by the
Financial Industry Regulatory Authority (``FINRA'') on behalf of the
Exchange, or by regulatory staff of the Exchange, which are designed to
detect violations of Exchange rules and applicable federal securities
laws. The Exchange represents that these procedures are adequate to
properly monitor Exchange trading of the Shares of the Fund in all
trading sessions and to deter and detect violations of Exchange rules
and federal securities laws applicable to trading on the Exchange.\19\
---------------------------------------------------------------------------
\19\ FINRA conducts cross-market surveillances on behalf of the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
---------------------------------------------------------------------------
The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares, certain futures
and certain options with other markets and other entities that are
members of the Intermarket Surveillance Group (``ISG''), and the
Exchange or FINRA, on behalf of the Exchange, or both, may obtain
trading information regarding trading in the Shares, certain futures
and certain options from such markets and other entities. In addition,
the Exchange may obtain information regarding trading in the Shares,
certain futures and certain options from markets and other entities
that are members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement. FINRA also can access
data obtained from the Municipal Securities Rulemaking Board relating
to municipal bond trading activity for surveillance purposes in
connection with trading in the Shares.
The Exchange represents that at least 90% of the weight of Fund
holdings invested in exchange-traded futures contracts and exchange-
traded options will be traded on an exchange that is a member of the
ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement.
2. Statutory Basis
The Exchange believes that the proposal is consistent with Section
6(b) of the Act \20\ in general and Section 6(b)(5) of the Act \21\ in
particular in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, to protect investors and the
public interest.
---------------------------------------------------------------------------
\20\ 15 U.S.C. 78f.
\21\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares of the Fund will be listed and traded on the Exchange pursuant
to the initial and continued listing criteria in NYSE Arca Rule 5.2-
E(j)(3), except for the requirement in Commentary .02(a)(2) that the
component fixed income securities, in the aggregate, account for at
least 75% of the weight of the index each shall have a minimum
principal amount outstanding of $100 million or more. The Exchange
represents that trading in the Shares will be subject to the existing
trading surveillances administered by the Exchange as well as cross-
market surveillances administered by FINRA on behalf of the Exchange,
which are designed to detect violations of Exchange rules and federal
securities laws applicable to trading on the Exchange.\22\ The Exchange
represents that these procedures are adequate to properly monitor
Exchange trading of the Shares in all trading sessions and to deter and
detect violations of Exchange rules and federal securities laws
applicable to trading on the Exchange. The Exchange or FINRA, on behalf
of the Exchange, or both, will communicate as needed regarding trading
in the Shares, certain futures and certain options with other markets
that are members of the ISG. In addition, the Exchange will communicate
as needed regarding trading in the Shares, certain futures and certain
options with other markets that are members of the ISG or with which
the Exchange has in place a comprehensive surveillance sharing
agreement. FINRA also can access data obtained from the Municipal
Securities Rulemaking Board relating to municipal bond trading activity
for surveillance purposes in connection with trading in the Shares of
the Fund. At least 90% of the weight of Fund holdings invested in
exchange-traded futures contracts and exchange-traded options will be
traded on an exchange that is a member of the ISG or with which the
Exchange has in place a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------
\22\ FINRA conducts cross-market surveillances on behalf of the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
---------------------------------------------------------------------------
As discussed above, the Exchange believes that the Index is
sufficiently broad-based to deter potential manipulation. For
informational purposes, as of April 30, 2018, 76.30% of the weight of
the 2026 Index components was comprised of individual maturities that
were part of an entire municipal bond offering with a minimum original
principal amount outstanding of $100 million or more for all maturities
of the offering. In addition, the total dollar amount outstanding of
issues in the 2026 Index was approximately $30.8 billion, the total
market value of issues in the 2026 Index was $35.2 billion, and the
average dollar amount outstanding of issues in the 2026 Index was
approximately $10,579,000. Further, the most heavily weighted component
represented 1.36% of the weight of the 2026 Index and the five most
heavily weighted components represented 4.24% of the weight of the 2026
Index.\23\ Therefore, the Exchange believes that, notwithstanding that
the 2026 Index does not satisfy the criterion in NYSE Arca Rule 5.2-
E(j)(3), Commentary .02(a)(2), the 2026 Index is sufficiently broad-
based to deter potential manipulation, given that it is comprised of
approximately 3,331 issues.
---------------------------------------------------------------------------
\23\ Commentary .02(a)(4) to NYSE Arca Rule 5.2-E(j)(3) provides
that no component fixed-income security (excluding Treasury
Securities and GSE Securities, as defined therein) shall represent
more than 30% of the weight of the index or portfolio, and the five
most heavily weighted component fixed-income securities in the index
or portfolio shall not in the aggregate account for more than 65% of
the weight of the index or portfolio.
---------------------------------------------------------------------------
On a continuous basis, (1) the Index will contain at least 500
components; and (2) each of the components of the Index will have an
outstanding par value of at least $2 million. As noted above, in the
iShares Orders, the Commission approved Exchange listing and trading of
Units for which each bond in the applicable underlying index must have
a minimum maturity par amount of $2 million to be eligible for
inclusion in such index, and each such index included at least 500
components.\24\ In each of the iShares Orders, the Commission stated
that the
[[Page 52271]]
applicable index was sufficiently broad-based and liquid to deter
potential manipulation.\25\
---------------------------------------------------------------------------
\24\ See note 5, supra.
\25\ See the iShares Orders, note 5, supra.
---------------------------------------------------------------------------
The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that a large amount of information will be publicly available regarding
the Fund and the Shares, thereby promoting market transparency. The
Fund's portfolio holdings will be disclosed on the Fund's website daily
after the close of trading on the Exchange. Moreover, the IIV will be
widely disseminated by one or more major market data vendors at least
every 15 seconds during the Exchange's Core Trading Session. The
current value of the Index will be disseminated by one or more major
market data vendors at least once per day. Information regarding market
price and trading volume of the Shares will be continually available on
a real-time basis throughout the day on brokers' computer screens and
other electronic services, and quotation and last sale information will
be available via the CTA high-speed line. The website for the Fund will
include the prospectus for the Fund and additional data relating to NAV
and other applicable quantitative information. Moreover, prior to the
commencement of trading, the Exchange will inform its ETP Holders in an
Information Bulletin of the special characteristics and risks
associated with trading the Shares.
If the Exchange becomes aware that the NAV is not being
disseminated to all market participants at the same time, it will halt
trading in the Shares until such time as the NAV is available to all
market participants. With respect to trading halts, the Exchange may
consider all relevant factors in exercising its discretion to halt or
suspend trading in the Shares of the Fund. Trading also may be halted
because of market conditions or for reasons that, in the view of the
Exchange, make trading in the Shares inadvisable. If the IIV or the
Index value is not being disseminated as required, the Exchange may
halt trading during the day in which the interruption to the
dissemination of the IIV or Index value occurs. If the interruption to
the dissemination of the IIV or Index value persists past the trading
day in which it occurred, the Exchange will halt trading. Trading in
Shares of the Fund will be halted if the circuit breaker parameters in
NYSE Arca Rule 7.12-E have been reached or because of market conditions
or for reasons that, in the view of the Exchange, make trading in the
Shares inadvisable, and trading in the Shares will be subject to NYSE
Arca Rule 7.34-E, which sets forth circumstances under which Shares of
the Fund may be halted. In addition, investors will have ready access
to information regarding the IIV, and quotation and last sale
information for the Shares.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of exchange-traded fund that holds municipal bonds
and that will enhance competition among market participants, to the
benefit of investors and the marketplace. As noted above, the Exchange
has in place surveillance procedures relating to trading in the Shares
and may obtain information via ISG from other exchanges that are
members of ISG or with which the Exchange has entered into a
comprehensive surveillance sharing agreement. In addition, investors
will have ready access to information regarding the IIV and quotation
and last sale information for the Shares.
For the above reasons, the Exchange believes that the proposed rule
change is consistent with the requirements of Section 6(b)(5) of the
Act.\26\
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\26\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act. The Exchange notes that the
proposed rule change will facilitate the listing and trading of an
additional type of Units based on a municipal bond index that will
enhance competition among market participants, to the benefit of
investors and the marketplace.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \27\ and Rule 19b-
4(f)(6) thereunder.\28\
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\27\ 15 U.S.C. 78s(b)(3)(A).
\28\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \29\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \30\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay so
that the proposed rule change may become operative upon filing. The
Exchange states that waiver of the 30-day delayed operative date is
consistent with the protection of investors and the public interest
because the Commission has previously approved listing and trading of
Units based on indexes with similar characteristics as those of the
Index.\31\ Additionally, the Exchange asserts that waiver will permit
the prompt listing and trading of an additional issue of Units that
principally holds municipal securities, which will enhance competition
among issuers, investment advisers and other market participants with
respect to listing and trading of issues of Units that hold municipal
securities. The Commission believes that the proposal raises no new or
novel regulatory issues and waiver of the 30-day operative delay is
consistent with the protection of investors and the public interest.
The Commission therefore waives the 30-day operative delay and
designates the proposed rule change to be operative upon filing.\32\
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\29\ 17 CFR 240.19b-4(f)(6).
\30\ 17 CFR 240.19b-4(f)(6)(iii).
\31\ See supra note 5.
\32\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the
[[Page 52272]]
Commission takes such action, the Commission shall institute
proceedings to determine whether the proposed rule change should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEARCA-2018-70 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEARCA-2018-70. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEARCA-2018-70, and should be
submitted on or before November 6, 2018.
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\33\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-22428 Filed 10-15-18; 8:45 am]
BILLING CODE 8011-01-P
